ACIT, New Delhi V. M/s. AB Hotels Ltd., New Delhi

ITA 6412/DEL/2012

• Counselvise Citation: 641220114 RSA 2012
• Duration Of Justice: 2 year(s) 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 20-01-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 27-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Y KAKKAR ASSESSING OFFICER
• Assessee Lawyers: DR RAKESH GUPTA; ADESH ANAND
• Keywords: Business income; Revenue expenditure
• Section: 143(3)

Judgement Text

I.T.A. NO.: 21/DEL/13 AND 6412/DEL/12 ASSESSMENT YEAR 2009-10 PAGE 1 OF 11 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI A BENCH, NEW DELHI [CORAM: PRAMOD KUMAR AM AND C. M. GARG JM] I.T.A. NO.: 212 /DEL/13 ASSESSMENT YEAR 2009-10 A. B. HOTELS LIMITED .APPELLANT RADISSON HOTEL NATIONAL HIGHWAY- 8 NEW DELHI 110 037 [PAN: AAACA2729B] VS. ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 3, NEW DELHI .R ESPONDENT I.T.A. NO.: 6412/DEL/12 ASSESSMENT YEAR 2009-10 ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 3, NEW DELHI .APPELLANT VS A. B. HOTELS LIMITED .. .RESPONDENT RADISSON HOTEL NATIONAL HIGHWAY- 8 NEW DELHI 110 037 [PAN: AAACA2729B] APPEARANCES BY: DR RAKESH GUPTA AND ADESH ANAND, FOR THE ASSESSEE Y KAKKAR, FOR THE ASSESSING OFFICER O R D E R PER PRAMOD KUMAR, AM: 1. THESE CROSS APPEALS CALL INTO QUESTION CORRECTNE SS OF LEARNED CIT(A)S ORDER DATED 29 TH OCTOBER 2012, IN THE MATTER OF ASSESSMENT UNDER SE CTION 143(3) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSM ENT YEAR 2009-10. WE WILL TAKE UP THESE CROSS APPEALS TOGETHER, FOR DISPOSAL BY WAY OF THIS CONSOLIDATED ORDER. I.T.A. NO.: 21/DEL/13 AND 6412/DEL/12 ASSESSMENT YEAR 2009-10 PAGE 2 OF 11 2. IN THE APPEAL FILED BY THE ASSESSE, THE FOLLOWIN G GRIEVANCE IS RAISED: THE LEARNED CIT(A)-II NEW DELHI HAS ERRED ON FACT I N CONFIRMING THE ACTION OF ACIT, CC -3, NEW DELHI UNDER SECTION 143 (3) WITH REGARD TO ASSESSING THE TAXABLE INCOME FROM HOUSE PROPERTY, A S BUSINESS INCOME, TO RS 6,59,36,930 DESPITE THE FACT THAT ITA T IN EARLIER YEARS HAS ACCEPTED THE CONTENTION OF THE COMPANY. 3. IN PLAIN WORDS, THE ASSESSE IS AGGRIEVED OF THE CIT(A) HOLDING THAT THE INCOME OF RS 6,59,36,930, WHICH HAS BEEN OFFERED TO TAX BY THE ASSESSE AS AN INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY, HAS RIGHTLY BEEN TAXED BY THE ASSESSING OFFICER UNDER THE HEAD PROFITS AND G AINS OF BUSINESS AND PROFESSION. THE DISPUTE IS, THUS, CONFINED TO THE HEAD UNDER WHICH THE INCOME IN QUESTION IS TO BE TAXED. 4. THE RELEVANT MATERIAL FACTS, AS CULLED OUT FROM THE MATERIAL PRODUCED BEFORE US, ARE AS FOLLOWS. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSE HAD SHOWN AN INCOME OF RS 6,85,30,860 AS AN INCOME FROM HOUSE PR OPERTY AND CLAIMED DEDUCTIONS, INTER ALIA, IN RESPECT OF MUNICIPAL TAX ES OF RS 31,96,341 AND STANDARD DEDUCTION UNDER SECTION 24 AT 30% WHICH WO RKED OUT TO RS 1,97,81,079. IN RESPONSE TO THE ASSESSING OFFICERS REQUISITION FOR DETAILS, INTER ALIA, OF RENTAL INCOME, IT WAS SUBMITTED THAT THE R ENTAL INCOME OF THE ASSESSE COMPRISES OF THE RENT FROM LETTING OUT OF THE SPAC E IN THE COMMERCIAL PLAZA TO DIFFERENT PARTIES. WHEN ASSESSING OFFICER REQUIRED THE ASSESSE TO SHOW CAUSE AS TO WHY THIS INCOME NOT BE TAXED AS A BUSINESS INCOM E, IT WAS SUBMITTED BY THE ASSESSE THAT RENTING OF COMMERCIAL COMPLEX IS ONE OF THE MAIN OBJECTS OF THE COMPANY AND THAT THIS ISSUE WAS RAISED IN EARLIER YEARS ALSO AND FINALLY SETTLED BY THE ITAT BENCH A IN WHICH IT WAS HELD THAT INC OME FROM COMMERCIAL COMPLEX IS TO BE ASSESSED AS PROPERTY INCOME ONLY. A COPY OF THE ORDER PASSED BY THE TRIBUNAL WAS ALSO SUBMITTED TO THE ASSESSING OFFICER. THE AO TOOK NOTE OF THE SAME BUT POINTED OUT THAT THE DISPUTE BEFORE THE TRIBUNAL WAS WHETHER THE INCOME WAS TAXABLE AS INCOME FROM OTHER SOURCE S OR AS INCOME FROM HOUSE I.T.A. NO.: 21/DEL/13 AND 6412/DEL/12 ASSESSMENT YEAR 2009-10 PAGE 3 OF 11 PROPERTY AND IT WAS IN THIS CONTEXT THAT THE TRIBU NAL HELD THAT THE INCOME WAS TAXABLE AS INCOME FROM HOUSE PROPERTY. THIS DECISIO N, ACCORDING TO THE ASSESSING OFFICER, HAD NO RELEVANCE IN THE PRESENT CONTEXT WHERE THE DISPUTE IS WITH RESPECT TO TAXABILITY UNDER THE HEAD PROFITS AND GAINS FROM BUSINESS AND PROFESSION VIS--VIS TAXABILITY UNDER THE HEAD IN COME FROM HOUSE PROPERTY. AS REGARDS THE REFERENCE TO THE MAIN OBJECTS OF THE AS SESSE COMPANY, THE AO WAS OF THE VIEW THAT THIS FACT SHOWS THAT RENTAL INCOME F ROM COMMERCIAL PLAZA IS TO BE TAXED AS BUSINESS INCOME MORE SO IN VIEW OF BUSINES S OBJECTS FOR WHICH COMPANY IS ESTABLISHED. THE AO THEN PROCEEDED TO DRAW PARITY BETWEEN RENTING OUT THE SPACE IN COMMERCIAL PLAZA AND IN RE NTING OUT THE HOTEL ROOMS AND OBSERVED THAT THERE IS NO DIFFERENCE BETWEEN L ETTING OUT OF THE HOTEL ROOMS AND THE RENTING OUT OF THE SHOPS IN THE HOTEL PREMI SES ESPECIALLY WHEN HOTEL PREMISES, INTER ALIA, INCLUDES COMMERCIAL COMPLEX A LSO. HE FURTHER NOTED THAT THE COMMERCIAL COMPLEX HAS NO SEPARATE IDENTITY AN D IS JUST A PART OF THE HOTEL BUILDING. THE AO WAS OF THE VIEW THAT JUST BECAU SE THE SHOPS ARE LET OUT FOR A LONGER DURATION, THERE CANNOT BE A TREATMENT DIFFER ENT FROM WHAT IS GIVEN TO THE RENTALS FROM LETTING OF ROOMS. THE AO ALSO REFERRED TO, AND RELIED UPON, HONBLE AP HIGH COURTS JUDGMENT IN THE CASE OF CIT VS A P SMALL SCALE INDUSTRIAL DEVELOPMENT CORP (175 ITR 352) AND HE ALSO BRIEFLY REFERRED TO HONBLE KARNATAKA HIGH COURTS DECISION IN THE CASE OF BALA JI ENTERPRISES VS CIT (225 ITR 471). IT WAS IN THIS BACKDROP THAT THE ASSESSIN G OFFICER REJECTED THE STAND OF THE ASSESSE AND PROCEEDED TO BRING TO TAX INCOME FR OM RENTING THE COMMERCIAL PREMISES AS AN INCOME UNDER THE HEAD PROFITS AND G AINS FROM BUSINESS AND PROFESSION. AGGRIEVED BY THE STAND SO TAKEN BY TH E ASSESSING OFFICER, ASSESSE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) BUT WITHOUT ANY SUCCESS. LEARNED CIT(A) NOTED THAT AS PER THE NOTES TO ACCOUNTS, THE PROJECT, WHICH ESSENTIALLY INCLUDES COMMERCIAL PREMISES SO GIVEN ON RENT AS WE LL, IS CONSTRUCTED ON THE LAND TAKEN ON LEASE FROM THE AIRPORT AUTHORITY OF I NDIA. IT WAS ALSO NOTED THAT THE TAX AUDIT REPORT DESCRIBES THE BUSINESS OF THE ASSESSE AS HOTEL WITH COMMERCIAL COMPLEX. HE WAS ALSO OF THE VIEW THAT, AS EVIDENT FROM THE BALANCE SHEET AND PROFIT AND LOSS ACCOUNT OF THE ASSESSE, A CCOUNTS OF THE ASSESSE ARE I.T.A. NO.: 21/DEL/13 AND 6412/DEL/12 ASSESSMENT YEAR 2009-10 PAGE 4 OF 11 SINGLE AND COMPOSITE. IT WAS ALSO NOTED THAT ALL THE FIXED ASSETS OF THE HOTEL AS ALSO THE COMMERCIAL COMPLEX ARE REPORTED TOGETHER A ND WITHOUT ANY SEGREGATION. IN THE LIGHT OF THESE OBSERVATIONS, T HE CIT(A) HELD THAT THE ENTIRE ACTIVITY OF THE APPELLANT IN AN ORGANIZED MANNER WA S TO EARN PROFITS OUT OF INVESTMENTS MADE BY IT IN ITS PROJECT OF HOTEL WITH COMMERCIAL SPACE, AS A COMMERCIAL VENTURE. LEARNED CIT(A) ALSO NOTED THA T ITS ONLY INCOME FROM A PROPERTY, OTHER THAN A PROPERTY USED FOR PLANNED BU SINESS ACTIVITY, WHICH CAN BE TAXED AS INCOME FROM HOUSE PROPERTY, AND SINCE TH E INCOME IN QUESTION WAS BY WAY OF AN ORGANIZED BUSINESS ACTIVITY, THE ASSESSIN G OFFICER RIGHTLY TAXED IT UNDER THE HEAD PROFITS AND GAINS FROM BUSINESS AND PROFESSION. THE ASSESSE IS NOT SATISFIED BY THE STAND SO TAKEN BY THE CIT(A) A S WELL, AND IS IN FURTHER APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF T HE APPLICABLE LEGAL POSITION. 6. THE TRUE TEST FOR AS TO WHETHER INCOME FROM LETT ING OF A PROPERTY IS TO BE TAXED UNDER THE HEAD INCOME FROM HOUSE PROPERTY OR AS A BUSINESS INCOME IS AS TO WHAT IS THE PRIMARY OBJECT OF THE ASSESSE, RATHE R THAN WHETHER THE ASSESSE IS LETTING OUT THE PROPERTY AS PART OF ITS MAIN BUSINE SS. AS HELD BY HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS SHAMBHU INVESTMENT S PVT LTD (249 ITR 47), WHICH HAS BEEN APPROVED BY HONBLE SUPREME COURT IN THE CASE OF SHAMBHU INVESTMENTS PVT LTD VS CIT (263 ITR 143), I F IT IS FOUND APPLYING SUCH TEST THAT THE MAIN INTENTION IS FOR LETTING OUT THE PROPERTY OR ANY PORTION THEREOF THE SAME MUST BE CONSIDERED AS RENTAL INCOME OR INCOME FROM PROPERTY AND IN CASE IT IS FOUND THAT THE MAIN INTENTION IS TO EXPL OIT THE IMMOVABLE PROPERTY BY WAY OF COMPLEX COMMERCIAL ACTIVITIES IN THAT EVENT IT MUST BE HELD AS BUSINESS INCOME. THERE CAN BE SITUATIONS IN WHICH THE ASSE SSEES MAIN BUSINESS MAY BE TO LET OUT A PROPERTY BUT WHEN, IN THE COURSE OF SU CH A BUSINESS, THE ASSESSEE LETS OUT SIMPLICTOR, WITHOUT COMPLEX COMMERCIAL ACTIVITI ES, THE INCOME FROM SUCH LETTING OUT WILL STILL BE TAXABLE UNDER THE HEAD I NCOME FROM A HOUSE PROPERTY. ON THE OTHER HAND, THERE CAN BE SITUATIONS WHEN ASS ESSE MAY NOT HAVE LETTING I.T.A. NO.: 21/DEL/13 AND 6412/DEL/12 ASSESSMENT YEAR 2009-10 PAGE 5 OF 11 OUT OF PROPERTIES AS ITS MAIN OBJECT, BUT WHEN, EVE N IN SUCH A SITUATION, THE ASSESSE EXPLOITS THE PROPERTY BY WAY OF A COMPLEX C OMMERCIAL ACTIVITY, INCOME FROM SUCH A LETTING OUT COULD STILL BE TAXABLE AS A BUSINESS INCOME. CLEARLY, THEREFORE, IT IS NOT THE BUSINESS AS AN OBJECT BUT COMPLEXITY OF THE BUSINESS ACTIVITY, IN THE COURSE OF LETTING OUT THE PROPERTY , WHICH IS DETERMINATIVE OF THE HEAD UNDER WHICH RENTAL INCOME IS TO BE BROUGHT TO TAX. HONBLE AP HIGH COURTS JUDGMENT IN THE CASE OF AP STATE SMALL SCALE DEVELO PMENT CORP (SUPRA), WHICH HAS BEEN RELIED UPON BY THE AO AS WELL, ALSO HAS EX PRESSED SIMILAR VIEWS WHEN THEIR LORDSHIPS OBSERVED AS FOLLOWS: ..WE ARE IN ENTIRE AGREEMENT WITH THE OBSE RVATIONS OF THE TRIBUNAL: 'BUT THE POSITION IS DIFFERENT WHERE THE INCOME REC EIVED IS NOT FROM THE LETTING OF THE TENEMENTS OR FROM THE LETTI NG ACCOMPANIED BY INCIDENTAL SERVICES OR FACILITIES BU T THE SUBJECT HIRED' IS A COMPLEX ONE AND THE INCOME OBTAINED IS NOT SO MUCH BECAUSE OF THE BARE LETTING OF THE TENEMENTS BUT BE CAUSE OF THE FACILITIES AND SERVICES RENDERED, AND THE OPERATION S INVOLVED IN EACH LETTING OF THE PROPERTY MAY BE OF THE NATURE O F BUSINESS OR TRADING OPERATIONS. IN SUCH A CASE, THE INCOME DERI VED IS LIABLE TO BE ASSESSED UNDER THE HEAD BUSINESS'. THE ABOVE PROPOSITIONS EMERGE FROM THE DECISION OF THE SUPREME COURT IN CI T VS. NATIONAL STORAGE (P) LTD. (SUPRA), AFFIRMING THE DE CISION OF THE BOMBAY HIGH COURT IN THE SAME CASE (1963) 48 ITR 57 7.' 11. IN CIT VS. NATIONAL STORAGE (P) LTD. (SUPRA), THE ASSESSEE PURCHASED A PLOT OF LAND AND CONSTRUCTED GODOWNS FO R STORAGE OF FILMS. THERE WERE 13 UNITS AND EACH UNIT WAS DIVIDED INTO FOUR VAULTS HAVING A GROUND FLOOR FOR REWINDING OF FILMS. THE UNITS WE RE CONSTRUCTED IN CONFORMITY WITH THE REQUIREMENTS AND SPECIFICATIONS LAID DOWN IN THE CINEMATOGRAPH FILM RULES, 1948. THE VAULTS WERE LIC ENSED TO FILM DISTRIBUTORS. UNDER THE LICENCE, THE VAULT COULD NO T BE USED FOR ANY PURPOSE OTHER THAN STORING CINEMA FILMS. THE ASSESS EE INSTALLED A FIRE ALARM AND PAID AN ANNUAL AMOUNT TO THE MUNICIPALITY TOWARDS FIRE SERVICES. IT MAINTAINED A REGULAR STAFF AND ALSO PA ID FOR THE ENTIRE STAFF OF THE INDIAN MOTION PICTURE DISTRIBUTORS ASSOCIATI ON FOR SERVICES RENDERED TO THE LICENSEES. IT WAS HELD THAT THE ASS ESSEE WAS CARRYING ON AN ADVENTURE OR CONCERN IN THE NATURE OF TRADE A ND THE SUBJECT WHICH WAS HIRED OUT WAS A COMPLEX ONE. DEALING WITH THE ACTIVITIES CARRIED ON BY THE ASSESSEE IN THAT CASE AND AGREEIN G WITH THE VIEW TAKEN BY THE BOMBAY HIGH COURT, THE SUPREME COURT H ELD : I.T.A. NO.: 21/DEL/13 AND 6412/DEL/12 ASSESSMENT YEAR 2009-10 PAGE 6 OF 11 'THE ASSESSEE KEPT THE KEY OF THE ENTRANCE WHICH PE RMITTED ACCESS TO THE VAULTS IN ITS OWN EXCLUSIVE POSSESSIO N. THE ASSESSEE WAS THUS IN OCCUPATION OF ALL THE PREMISES FOR THE PURPOSE OF ITS OWN CONCERN, THE CONCERN BEING THE HIRING OUT OF SP ECIALLY BUILD VAULTS AND PROVIDING SPECIAL SERVICES TO THE LICENS EES. AS OBSERVED BY VISCOUNT FINLAY IN GOVERNORS OF THE ROT UNDA HOSPITAL, DUBLIN VS. COMAN (1920) 7 TC 517; (1921) AC 1, THE SUBJECT WHICH IS HIRED OUT IS A COMPLEX ONE' AND TH E RETURN RECEIVED BY THE ASSESSEE IS NOT THE INCOME DERIVED FROM THE EXERCISE OF PROPERTY RIGHTS ONLY BUT IS DERIVED FRO M CARRYING ON AN ADVENTURE OR CONCERN IN THE NATURE OF TRADE.' 7. IT IS, THEREFORE, QUITE CLEAR THAT AN INCOME FRO M LETTING OUT CAN BE BROUGHT TO TAX UNDER THE HEAD PROFITS AND GAINS OF BUSINES S AND PROFESSION ONLY WHEN INCOME RECEIVED IS NOT ONLY FOR LETTING ACCOMPANIE D BY INCIDENTAL SERVICES OR FACILITIES BUT THE SUBJECT HIRED' IS A COMPLEX ONE AND THE INCOME OBTAINED IS NOT SO MUCH BECAUSE OF THE BARE LETTING OF THE TENEMENT S BUT BECAUSE OF THE FACILITIES AND SERVICES RENDERED. THE TRUE TEST FOR DECIDING WHETHER INCOME IS TO BE TAXED UNDER THE HEAD PROPERTY INCOME OR BUSINESS IN COME, THEREFORE, LIES IN EXAMINING COMPLEXITY OF THE ACTIVITY WHICH SHIFTS T HE CORE AND PROXIMATE REASON OF EARNING FROM PROPERTY LET OUT TO THE EARNING FRO M BUSINESS ACTIVITY CARRIED OUT. TAKE THE CASE OF HIRING OUT A HOTEL ROOM WHIC H HAS ADDED VALUE FOR EARNING NOT BECAUSE OF THE ROOM SIMPLICTOR BUT BECAUSE OF T HE INTEGRATED COMPLEX ACTIVITIES SUCH AS ROOM MAINTENANCE AND UPKEEP, HOU SE KEEPING SUPPORT, AMENITIES INSIDE AND OUTSIDE THE ROOM, ROOM SERVICE AND SUPPORT, LOBBY AND COMMON SPACE, RECREATIONAL FACILITIES, HEALTH CLUB AND SWIMMING POOL, TELEPHONE, FAX AND MESSAGE SERVICES, BUTLER AND END LESS OTHER SERVICES. THESE SERVICES, AND COMPLEX BUSINESS ACTIVITY IN RESPECT THERETO, ARE SO VITAL THAT THE IMPORTANCE OF THESE SERVICES IS AS MUCH AS THE PROP ERTY ITSELF EVEN WHEN SUCH SERVICES DONOT RELEGATE THE PROPERTY LET OUT INTO R ELATIVE INSIGNIFICANCE. ON THE OTHER HAND, EVEN WHEN PROPERTY IS LET OUT IN THE CO URSE OF THE BUSINESS OR AS A PART OF THE CORE BUSINESS, IN A SITUATION IN WHICH CONSIDERATION FOR SUCH LETTING OUT IS PREDOMINANTLY FOR THE USE OF PROPERTY ITSELF , RATHER THAN THE INCIDENTAL I.T.A. NO.: 21/DEL/13 AND 6412/DEL/12 ASSESSMENT YEAR 2009-10 PAGE 7 OF 11 FACILITIES AND SERVICES, THE INCOME WILL NEVERTHEL ESS BE TAXABLE AS INCOME FROM HOUSE PROPERTY. 8. IN THE SITUATION THAT WE ARE DEALING WITH, IT IS NOT EVEN THE CASE OF THE ASSESSING OFFICER THAT THE LETTING IS ACCOMPANIED B Y INCIDENTAL SERVICES AND FACILITIES WHICH HAVE A DOMINANT ROLE TO PLAY IN TH E EARNING FROM THE PROPERTY LET OUT. WE HAVE ALSO PERUSED THE LEASE AGREEMENTS FILE D BEFORE US AND WE FIND THAT THE PROPERTY IS LET OUT, WITHOUT ANY DOMINANT INCID ENTAL SERVICES AS PART OF THIS ARRANGEMENT, FOR THE PURPOSES OF RUNNING OFFICES AN D COMMERCIAL ESTABLISHMENTS. WE DONOT FIND IT A CASE OF ANYTHING MORE THAN SIMPLE LETTING OUT OF PROPERTY WHERE THE EMPHASIS IS ON THE PROPERTY I TSELF RATHER THAN THE SERVICES. IT IS TRUE THAT THE COMMERCIAL OR OFFICE COMPLEX IS ON THE SAME PLOT ON WHICH THE HOTEL IS SITUATED BUT IT IS UNDISPUTEDLY DISTINCT FROM, EVEN IF SOMEWHAT ATTACHED TO, THE HOTEL ITSELF, AND, THEREFORE, THE FACT OF THE COMMERCIAL COMPLEX BEING ON THE SAME PLOT DOES NOT HELP THE CASE OF TH E REVENUE. THE PHYSICAL PROXIMITY OF THE HOTEL AND THE COMMERCIAL COMPLEX D OES NOT REALLY MATTER AS LONG AS THE CHARACTER OF ARRANGEMENT HAS DISTINCT C HARACTER, AND THERE IS NO DISPUTE ON THAT ASPECT. IT IS A CASE OF RENTING SIM PLICTOR AND THE SERVICES INCIDENTAL TO LETTING OUT DO NOT CONSTITUTE SUCH C OMPLEX CHARACTER SO AS TO BE RENDER IT AS A BUSINESS BY ITSELF. 9. WE HAVE ALSO NOTED THAT UNDISPUTEDLY IN THE EARL IER ASSESSMENT YEARS, COORDINATE BENCHES HAVE HELD THAT THE INCOME FROM L ETTING OUT IS IN THE NATURE OF INCOME FROM HOUSE PROPERTY. ONCE THERE ARE CATEGORI CAL FINDINGS TO THIS EFFECT, AND THERE IS NO DISPUTE ON THAT FACT, IT IS NOT OPE N TO THE LOWER AUTHORITIES TO STILL HOLD THAT THE INCOME CAN BE TAXED AS BUSINESS INCOM E BECAUSE THAT ASPECT OF THE MATTER WAS NOT EXAMINED. WE ARE UNABLE TO SEE ANY M ERITS IN THIS APPROACH. AS LAID DOWN BY THE APEX COURT IN THE CASE OF AMBIKA P RASAD MISHRA VS. STATE OF UP AIR 1980 SC 1762 : (1980) 3 SCC 719 (P. 1764 OF AIR 1980 SC) 'EVERY NEW DISCOVERY NOR ARGUMENTATIVE NOVELTY CANNOT UNDO OR COMPEL RECONSIDERATION OF A BINDING PRECEDENT... A DECISION DOES NOT LOSE ITS AUTHORITY MERELY BECAUSE IT I.T.A. NO.: 21/DEL/13 AND 6412/DEL/12 ASSESSMENT YEAR 2009-10 PAGE 8 OF 11 WAS BADLY ARGUED, INADEQUATELY CONSIDERED OR FALLAC IOUSLY REASONED....'. LEARNED CIT(A) WAS THUS IN ERROR IN NOT FOLLOWING A BINDING JUDICIAL PRECEDENT. HIS ADVENTURISM WAS NEITHER JUDICIALLY APPROPRIATE NOR LEGALLY PERMISSIBLE. IN THIS VIEW OF THE MATTER, FOR THE REASON OF CONSISTENCY I N APPROACH AND BOUND BY THE JUDICIAL PRECEDENT BY THE COORDINATE BENCH ALSO, WE HOLD THAT THE INCOME FROM LETTING OUT THE PROPERTY OUGHT TO HAVE BEEN TAXED U NDER THE HEAD INCOME FROM HOUSE PROPERTY. 10. IN VIEW OF THE ABOVE DISCUSSIONS, AS ALSO BEARI NG IN MIND ENTIRETY OF THE CASE, WE UPHOLD THE PLEA OF THE ASSESSE AND DIRECT THE ASSESSING OFFICER TO TAX THE RENTAL INCOME OF RS 6,59,36,930 UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND ALLOW THE DEDUCTION UNDER THE SCHEME OF TAXABILITY OF INCOME UNDER THIS HEAD. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. 12. WE NOW MOVE ON TO THE APPEAL FILED BY THE ASSES SING OFFICER. 13. GRIEVANCE RAISED BY THE ASSESSING OFFICER IS AS FOLLOWS: THAT THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS O F THE CASE IN DELETING THE ADDITION OF R 25,95,251 MADE BY THE AS SESSING OFFICER ON ACCOUNT OF DISALLOWANCE OF BRAND BUILDING EXPENSES. 14. SO FAR AS THIS GRIEVANCE OF THE ASSESSING OFFIC ER IS CONCERNED, THE RELEVANT MATERIAL FACTS ARE AS FOLLOWS. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE ASSESSE HAD DE BITED A SUM OF RS 51,90,502 ON ACCOUNT OF CONTRIBUTION FOR BRAND BUILDING EXPEN SES PAYMENT TO CARLSON HOSPITAL MARKETING PVT LTD. IT WAS NOTED THAT THE A SSESSE WAS PAYING RS 56,000 PER MONTH IN THIS REGARD, AND A FURTHER BILL OF RS 12,00,128 WAS RAISED ON THE BASIS OF GROSS ROOM REVENUE. IT WAS ALSO NOTICED TH AT THE ASSESSE WAS ASKED TO CONTRIBUTE 0.50% OF GROSS ROOM REVENUE, IN ADDITION TO 0.25% OF GRR AND I.T.A. NO.: 21/DEL/13 AND 6412/DEL/12 ASSESSMENT YEAR 2009-10 PAGE 9 OF 11 RESERVATION FEES OF 0.25%. ON THESE FACTS, THE AO D ISALLOWED THE 50% OF THE EXPENSES AS RELATABLE TO THE SUBSEQUENT ASSESSMENT YEAR, BY OBSERVING AS FOLLOWS: THE EXPENSES WHICH HAVE BEEN ENHANCED THIS WAY WILL HELP THE COMPANY IN FUTURE YEARS AND, THEREFORE, CANNOT BE S AID TO BE EXPENSES HELD FOR BUSINESS DURING THE YEAR UNDER CO NSIDERATION. THE ASSESSE COMPANY HAS BEEN FOLLOWING THE MERCANTILE M ETHOD OF ACCOUNTING, AND, THEREFORE, OUT OF TOTAL EXPENSES D EBITED, A SUM OF 50% (BEING THE ADDITIONAL BRAND BUILDING EXPENSES C HARGED) IS RELATED TO THE PROFITS OF THE SUBSEQUENT YEARS AND CANNOT BE ALLOWED. THEREFORE, DISALLOWED AND ADDED BACK TO THE INCOME OF THE ASSESSE COMPANY. THIS WILL RESULT IN DISALLOWANCE OF RS 25, 95,251 AND THE INCOME OF THE COMPANY IS ENHANCED BY THIS MUCH OF A MOUNT. 15. AGGRIEVED BY THE STAND SO TAKEN BY THE AO, ASSE SSE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) WHO DELETED THE DISALLOWAN CE AND OBSERVED AS FOLLOWS: THE SUBMISSIONS OF THE APPELLANT ARE CONSIDERED. IT IS APPARENT THAT FROM FY 07-08, RELEVANT TO AY 08-09, THE APPELLANT IS PAYING A HIGHER SUM TOWARDS ITS CONTRIBUTION FOR BRAND BUILDING, AN D THE PAYMENTS FOR BRAND BUILDING HAVE BEEN ALLOWED BY THE AO IN T HE EARLIER YEARS, INCLUDING THE PRECEDING YEAR WHEN PAYMENTS WERE ENH ANCED. IN THE YEAR UNDER CONSIDERATION, ADHOC DISALLOWANCE TO THE EXTENT OF 50% HAS BEEN MADE WITHOUT ANY CLEAR AND COGENT BASIS OR FINDINGS TO DEMONSTRATE THAT IT IS RELATABLE TO FUTURE YEARS. T HE ARBITRARY DISALLOWANCE OUT OF THE TOTAL EXPENSES DEBITED UNDE R THE BRAND BUILDING EXPENSES IS DEVOID OF LOGIC AND, THEREFORE , CANNOT BE SUSTAINED. 16. THE ASSESSING OFFICER IS AGGRIEVED OF THE RELIE F SO GIVEN BY THE CIT(A) AND IS IN APPEAL BEFORE US. 17. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED TH E MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF T HE APPLICABLE LEGAL POSITION. I.T.A. NO.: 21/DEL/13 AND 6412/DEL/12 ASSESSMENT YEAR 2009-10 PAGE 10 OF 11 18. WE FIND THAT THE ASSESSING OFFICER HAS MADE THE IMPUGNED DISALLOWANCE ON THE SHORT GROUND THAT THE BENEFITS OF THIS EXPEN DITURE WILL ALSO BE AVAILABLE IN THE SUBSEQUENT YEARS AND SINCE THE ASSESSE IS ADMIT TEDLY FOLLOWING THE MERCANTILE METHOD OF ACCOUNTING, THE EXPENDITURE SH OULD BE ALLOWED IN THE YEAR TO WHICH IT PERTAINS. IN DOING SO, HOWEVER, WHAT TH E ASSESSING OFFICER HAS OVERLOOKED IS THAT EVEN UNDER THE MERCANTILE METHOD OF ACCOUNTING, THE EXPENSES ARE BOOKED AT THE POINT OF TIME WHEN THE L IABILITY TO PAY CRYSTALLIZES AND IRRESPECTIVE OF WHETHER THE BENEFIT ARE WHOLLY IN THE CURRENT YEAR, OR PARTLY IN FUTURE YEAR AS WELL, A REVENUE EXPENDITURE IS AL LOWED AS A DEDUCTION IN THE YEAR IN WHICH IT IS INCURRED. THE CONTRIBUTION PERT AINS TO THE CURRENT YEAR AND IS BASED ON THE REVENUES OF THE CURRENT YEAR. IT IS UN DISPUTED THAT THAT IT COVERS THE PERIOD RELATED TO THE RELEVANT PREVIOUS YEAR. T HERE IS NO DISPUTE THAT EXPENDITURE IS A REVENUE EXPENDITURE, THERE IS NO D ISPUTE THAT THE EXPENDITURE IS INCURRED IN THE PRESENT YEAR, THERE IS NO DISPUTE T HAT ALL ALONG EVEN THE INCREASED CONTRIBUTIONS HAVE BEEN ALLOWED AS REVENU E EXPENSES IN THE YEAR IN WHICH THE CONTRIBUTIONS HAVE BEEN MADE AND TO WHICH CONTRIBUTIONS PERTAIN. IN SUCH CIRCUMSTANCES, A PURELY ADHOCK DISALLOWANCE ON THE BASIS THAT THE BENEFITS OF THIS CONTRIBUTION WILL ALSO BE AVAILABLE IN A SU BSEQUENT PERIOD, IS WHOLLY UNCALLED FOR. WE ARE UNABLE TO SEE ANY MERITS IN TH IS SAME. 19. WE HAVE ALSO NOTED THAT THE EXPENSES ARE PARTLY ALLOWED AS DEDUCTION. THEREFORE, GENUINENESS, REVENUE NATURE AND BUSINESS EXPEDIENCY OF THESE EXPENSES IS ACCEPTED BY THE ASSESSING OFFICER HIMSE LF. IT IS NOT REALLY NECESSARY, THEREFORE, TO DEAL WITH THAT ASPECT OF THE MATTER. SUFFICE TO SAY THAT WE DISAPPROVE THE ACTION OF THE AO AND CONFIRM THE REL IEF GRANTED BY THE CIT(A). IN OUR CONSIDERED VIEW, NO INTERFERENCE IS CALLED FOR. 20. THE APPEAL FILED BY THE ASSESSING OFFICER IS TH US DISMISSED. I.T.A. NO.: 21/DEL/13 AND 6412/DEL/12 ASSESSMENT YEAR 2009-10 PAGE 11 OF 11 21. TO SUM UP, THE APPEAL FILED BY THE ASSESSE IS A LLOWED AND THE APPEAL FILED BY THE ASSESSING OFFICER IS DISMISSED. PRONOUNCED I N THE OPEN COURT TODAY ON 31 ST DAY OF MARCH, 2015. SD/- SD/- C M GARG PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) NEW DELHI, THE 31 ST DAY OF MARCH, 2015. COPIES TO: (1) THE APPELLANT (2) THE RESPON DENT (3) COMMISSIONER (4) CIT (A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ETC ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES, NEW DELHI